Melrose’s vow over GKN bid
MELROSE has pledged not to sell GKN’s aerospace division before 2023 if it succeeds with an £8 billion hostile takeover after the Government demanded “binding commitments”.
The industrial turnaround specialist set out proposed undertakings including maintaining its UK listing and headquarters for five years, as well as at least matching the current level of research and development spending.
It was responding to an intervention by Business Secretary Greg Clark two days before GKN shareholders have to make up their mind whether to accept the bid.
Clark acknowledged that Melrose’s model of improving businesses before selling them “can have an important and beneficial role”, but warned of “tensions” that could arise in view of the need for long-term investment and stability.
He said: “The public should reasonably expect companies that benefit from long-term public sector contracts or indirectly from Government-supported long-term research and development should be willing and able to adopt appropriate time horizons.
“I am concerned that a short-term approach to ownership may not be compatible with maintaining the longer-term relationships which characterise the best interests of the defence field. I would expect to see a commitment to continuity of ownership and strategic investment specific to the defencerelated business of GKN and to exclude the option of a short-term sale of this business without Government consent.”
Melrose CEO Simon Peckham, pictured, said it had bid because GKN under its current board had “underperformed its potential and needs help”.
It would likely need “a number of years” of ownership to improve the business and they would invest “as if we were going to own these businesses for ever”.
Melrose would create a £10 million, five-year skills, innovation and productivity fund to create up to 150 apprenticeships.
GKN said Clark’s intervention showed Melrose “is the wrong owner” and had made no five-year commitment to GKN’s automotive business. GKN has agreed to merge this with US auto parts group Dana.
GKN CEO Anne Stevens said: “Melrose is asking shareholders to consider last-minute undertakings. If this is how it behaves when bidding, how can it be trusted if it gets its hands on the wheel?”